#Asia_Daybook – M2M-VN.COMhttp://m2m-vn.com
Join us to experience it!Thu, 15 Feb 2018 12:19:49 +0000en-UShourly1https://wordpress.org/?v=4.9.3Another wild day for U.S. marketshttp://m2m-vn.com/another-wild-day-u-s-markets/
http://m2m-vn.com/another-wild-day-u-s-markets/#respondThu, 15 Feb 2018 00:56:49 +0000http://m2m-vn.com/?p=16489Another wild day for U.S. markets It was another wild day for American markets, U.S. inflation shows more signs of picking up, and could China be poised to relax capital controls? Here are some of the things people in markets are talking about. Manic Markets (Bloomberg)-A rally in global stocks looks set to continue in Asia, after U.S. …

Another wild day for U.S. markets

It was another wild day for American markets, U.S. inflation shows more signs of picking up, and could China be poised to relax capital controls? Here are some of the things people in markets are talking about.

Manic Markets

(Bloomberg)-A rally in global stocks looks set to continue in Asia, after U.S. stocks extended a rebound and Treasury yields rose to a four-year high as economic data supported expectations that the Federal Reserve will maintain a gradual approach to raising interest rates. The S&P 500 Index climbed for a fourth day as banks and durable-goods makers rallied, returning the gauge to a gain for the year after it fell more than 10 percent from a January peak. Gold rallied and the dollar slumped as the 10-year Treasury yield topped 2.9 percent. Signs of an inflation pickup have roiled financial markets this month, and stock futures tumbled early Wednesday on concern the Fed would quicken its pace of tightening following data that showed faster-than-forecast inflation. Those fears quickly receded as investors digested a separate report showing weak retail sales that raised questions about the economy’s strength.

Speaking of Inflation

The most widely watched U.S. CPI print in recent memory didn’t disappoint. Consumer prices rose by more than projected in January as apparel costs jumped the most in nearly three decades. The CPI gained 0.5 percent from the previous month, above the median estimate of economists for a 0.3 percent increase – making it look like a worthwhile decision for the Asia trader who stayed up with pizza and diet Coke. Retail sales unexpectedly declined in January and December receipts were revised lower, indicating consumer demand in the first quarter may cool. In Japan, the slowest economic growthin two years and the strongest yen in 15 months highlight the country’s ongoing struggle to revive inflation even as prices elsewhere in the developed world begin to inch higher. And China’s PBOC said inflation pressures are “slight” but warrant close watch.

Could Beijing Relax Capital Curbs?

In the fraught history of Chinese currency policy, a new chapter could be looming this year as authorities consider the consequences of a yuan that’s testing its strongest levels since mid-2015. After successfully shutting off potentially destabilizing capital outflows and putting a floor under the yuan, policy makers may now have the luxury of looking at relaxing some of the strictures on domestic money. While no officials have clearly signaled an intent to relax controls, recent comments and moves hint at the potential for modification of the one-way capital account opening that China has been pursuing since 2016 — in which it has encouraged inflows but not outflows. Still, China watchers warn that any moves are likely to be gradual and calibrated, given the turmoil of 2015 — when a sliding yuan spooked global markets.

Indonesia on Hold

Bank Indonesia is likely to keep its policy rate at 4.25 percent on Thursday, according to all 19 economists surveyed. Officials have been in a holding pattern since back-to-back cuts in August and September that capped an aggressive run of monetary policy easing that began at the start of 2016. The economy has picked up pace and inflation is under control, with consumer prices rising at the slowest pace in more than a year in January. But the rupiah has become volatile, falling 2 percent against the dollar since Jan. 29 to become the worst-performing currency in Asia. Bank Indonesia has made it clear it will continue to intervene to support the currency, which could also come under pressure as interest rates rise in the U.S. and elsewhere. The global selloff has also led to more than $560 million of net withdrawals from Indonesian bonds this month.

Coming Up…

While China will be off to celebrate Lunar New Year, Australian rates traders will be gearing up for the monthly labor market report to see if the country can go on adding jobs at last year’s record pace. We also get trade data for Singapore, Indonesia and India, along with the rate decision from Indonesia’s central bank. Europe features CPI from Spain, Greece and Ireland.

And finally, here’s what David’s interested in this morning

My colleague Haslinda and I spoke with Oversea-Chinese Bank Corp. CEO Samuel Tsien on Wednesday, right after the Singapore-based bank released its results. The conversation revolved around the usual topics: revenue drivers, guidance, and plans for growth. But something else occurred to me after we finished. This specific set of results from OCBC, and more generally from the other Singapore banks, contained peculiar elements of the transition investors are trying to price around. The recent wobble in financial markets is essentially the world coming to grips with inflation returning to normal. The bank’s 31 percent profit pop was driven by rising income from lending and generally less provisions for bad debt — evidence of synchronized global growth that’s starting to churn out real signs of reflation.

But equally, the bank continued to provision for the oil and gas services part of its portfolio. In other words: yes, bad loans are mostly behind us but the epic oil price crash in 2014 still hasn’t quite made its way out of the system. Tsien also acknowledged some tightness in the interbank markets — reflective of the rapid tightening in financial conditions. If you have 10 minutes, I highly recommend watching the entire conversation. A balance sheet provides a decent snapshot of corporate health, and this discussion does the same for the market’s recent issues.

]]>http://m2m-vn.com/another-wild-day-u-s-markets/feed/0Another global step for China’s yuanhttp://m2m-vn.com/another-global-step-chinas-yuan/
http://m2m-vn.com/another-global-step-chinas-yuan/#respondWed, 14 Feb 2018 01:27:21 +0000http://m2m-vn.com/?p=16479Another global step for China’s yuan JPMorgan gets appointed the first non-Chinese yuan-clearing bank, the Bank of Japan is reportedly keeping Haruhiko Kuroda at the helm, and U.S. CPI looms large. Here are some of the things people in markets are talking about. BOJ May Stay the Course (Bloomberg)-As its global peers navigate back to normal monetary policy, …

Another global step for China’s yuan

JPMorgan gets appointed the first non-Chinese yuan-clearing bank, the Bank of Japan is reportedly keeping Haruhiko Kuroda at the helm, and U.S. CPI looms large. Here are some of the things people in markets are talking about.

BOJ May Stay the Course

(Bloomberg)-As its global peers navigate back to normal monetary policy, the Bank of Japan looks set to stay the course for now, with Haruhiko Kuroda at the helm for another term. The government wants him to return as governor, a senior government official told Bloomberg, adding that nothing has been finalized. Reports that Kuroda will be joined by Masayoshi Amamiya and Etsuro Honda as deputy governors add weight to the steady-as-she-goes view. But while analysts agree that Kuroda’s reappointment is likely to mean the BOJ’s radical easing continues in the short term, many analysts still expect future adjustments as the central bank tries to navigate the road ahead.

CNY + JPM

The People’s Bank of China appointed JPMorgan Chase Bank N.A. as a yuan-clearing bank in the U.S., the first non-Chinese lender for such a role globally and a further step to promote international use of the currency. The arrangement is made under the auspices U.S.-China strategic economic dialogue and in conjunction with the U.S. Federal Reserve, according to a statement posted on the People’s Bank of China website on Tuesday. Bank of China Ltd.’s New York branch already conducts such business in the U.S. and other Chinese lenders clear yuan payments in a number of countries.

Resistance to Trump Tariffs

Republican lawmakers cautioned President Donald Trump in a White House meetingagainst levying tariffs on steel and aluminum imports, warning that it would raise prices of the metals and potentially cost the U.S. jobs in other industries including car manufacturing. “Part of the options would be tariffs,” Trump said at the beginning of the meeting with members of Congress from both parties. “I want to keep prices down but I want to make sure that we have a steel industry.”

All Eyes on CPI

Wednesday’s report on the U.S. consumer price index will be the most closely watched in recent memory, with investors seeking to understand the recent plunges in stocks and bonds. Jittery financial markets could convulse on any sign that inflation is exceeding expectations at a rate that may spur the Federal Reserve to quicken its plans for tightening. The threat of higher interest rates after strong job and wage figures on Feb. 2 sent Treasury yields spiking and started a rout in equities that pushed them into the first correction in two years. Bonds and stocks have been in a tug-of-war since, as battered equity investors seek the haven of fixed income, driving yields back down. Core CPI, which excludes food and energy, rose 1.7 percent in January from a year earlier, compared with 1.8 percent in December, according to the median projection of economists ahead of the Labor Department data.

Coming Up…

Lunar new year celebrations for the Year of the Dog are set to kick off, affecting China, Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21. It’s set to be a banner day for data out of Asia, with GDP readings for Japan (preliminary) and Singapore (final) due within 10 minutes of each other Wednesday morning, followed by Malaysian GDP in the afternoon. Thailand is expected to keep its benchmark interest rate on hold at 1.5 percent. The European session brings GDP for the euro area and Germany (CPI too). Across the Atlantic, the U.S. releases retail sales figures in addition to the all-important CPI print.

And finally, here’s what David’s interested in this morning

When I look at the chart below, those old, everything-must-go TV mattress commercials come to mind. As investors start to pick up the pieces from recent down leg, it’s become apparent how bargain-basement cheap even the most favored equity markets have suddenly become. Take Japan, which had already been a consistent top pick among fund managers and strategists. When everything was getting tossed out the window, the Nikkei 225 took the biggest hit globally after Venezuela, Argentina and Hong Kong. Valuations went from about 20 times forward earnings to just above 17 within the span of about 2 weeks. If you believe the simple, straightforward earnings optimism analysts have repeatedly come back to, those multiples are happy-hour prices.

In case you missed it (and you probably have), Japan’s current earnings season has been generally solid as predicted. About 75 percent of Nikkei 225 companies have reported higher-than-expected revenues, with about 65 percent beating on the bottom-line. Some of the busiest reporting days were right at the height of the recent market rout so most results kind of got glossed over. Have a look if you haven’t already.

]]>http://m2m-vn.com/another-global-step-chinas-yuan/feed/0Brace for another bumpy ridehttp://m2m-vn.com/brace-another-bumpy-ride/
http://m2m-vn.com/brace-another-bumpy-ride/#respondMon, 12 Feb 2018 02:03:53 +0000http://m2m-vn.com/?p=16433Brace for another bumpy ride Traders start the week on edge, North Korea invites the South to talks and a far-reaching bank inquiry starts in Australia. Here are some of the things people in markets are talking about. Jittery Markets (Bloomberg)-Investors are bracing for another bumpy ride this week after volatility returned with a vengeance, delivering …

Brace for another bumpy ride

Traders start the week on edge, North Korea invites the South to talks and a far-reaching bank inquiry starts in Australia. Here are some of the things people in markets are talking about.

Jittery Markets

(Bloomberg)-Investors are bracing for another bumpy ride this week after volatility returned with a vengeance, delivering the biggest rout in Asian stocks since 2011. Futures point to a lower start to equity trading as Asia kicks off the week. While U.S. stocks ended their worst week in two years in the green on Friday, fears of interest rate hikes that pushed markets into a correction persist. The Cboe Volatility Index ended almost three times higher than its Jan. 26 level. Ten-year Treasury yields finished the week at 2.85 percent, near where they started. This week’s U.S. inflation report may be the next catalyst for the tug-of-war between stocks and bonds that underlies the market turbulence.

Koreas Summit

North Korea asked South Korean PresidentMoon Jae-in to a summit in Pyongyang, possibly seeking to drive a wedge between Seoul and Washington. Kim Jong Un’s sister Kim Yo Jong delivered the invitation during weekend meetings at the Winter Olympics in Pyeongchang. U.S. Vice President Mike Pence didn’t discuss the issue in talks with Moon, and insisted there was “no daylight” between the two allies on sanctions against North Korea. Meanwhile, Kim Yo Jong shook hands with South Korean President Moon Jae-in at the Games and cheered enthusiastically for a unified Korean team.

Australian Bank Inquiry

Australia’s banks, rocked by years of scandals and wrongdoing, come under scrutiny as a yearlong sweeping government probe into the nation’s financial systems begins. The Royal Commission will examine the nation’s banks, insurers, financial services providers and pension funds, and consider whether regulators have enough power to tackle misconduct. Anger over bank conduct has grown as evidence of wrongdoing mounts — from rigging interest rates and ripping off customers, to allegations thatCommonwealth Bank of Australia breached anti-money laundering and terrorism financing laws more than 50,000 times — even as lenders rack up record profits.

India’s Hidden Bad Loans

The markets regulator unearthed about $3.6 billion of bad loans in the books of India’s biggest bank, amplifying questions about distress in the financial sector. State Bank of India on Friday said an audit by the central bank showed soured debt was about 232 billion rupees higher than what the state-run lender reported for the end of March 2017. The biggest private lender HDFC Bank Ltd. had a 20.5 billion rupee divergence. State Bank of India’s admission is particularly striking because the lender is often seen as a proxy for the nation’s economy, where the ratio of bad loanshas surged to be among the highest in the world.

Data to Watch

There isn’t much in the way of data Monday in Asia to distract markets, with Singapore retail sales and Indian figures on industrial production and CPI the key releases. Later, eyes will turn to the U.S. government’s spending plans as well as CPI and retail sales. U.S. CPI is forecast to have slowed last month on an annual basis. President Donald Trump expects to release a plan to generate $1.5 trillion in infrastructure upgrades and he will also deliver his 2019 budget blueprint, in which he’s expected to back a major Pentagon buildup. The earnings deluge continues with Credit Suisse, Credit Agricole and Japan Post Bank set to release results.

And finally, here’s what Cormac’s interested in this morning

After volatility came roaring back with a vengeance last week and knocked many stock markets back into correction territory, it’s worth pointing out the dog that didn’t bark: the high-yield bond market. If investors were reacting to the fear that inflation is back and, with it, higher interest rates, then the bonds of the world’s most leveraged companies should be the first things to sell off. Yet that didn’t really happen. It was equities that took the big hit, with only a minor rise in high-yield bond spreads.

As many commentators have noted, global economic fundamentals remain strong, and the current market wobble may indeed be just a technically-driven “healthy” setback. But keep an eye on our high-yield friends, particularly as leverage has soared since the financial crisis, from the U.S. to China and most everywhere in between. They are the canary in the coal mine for when investors really do need to worry.

Source: FXWire Commentary

]]>http://m2m-vn.com/asian-markets-significantly-gold-hovers-around-1330-mark/feed/0Equity investors, brace yourselveshttp://m2m-vn.com/equity-investors-brace/
http://m2m-vn.com/equity-investors-brace/#respondMon, 05 Feb 2018 01:15:22 +0000http://m2m-vn.com/?p=16345Traders brace themselves after Friday’s U.S. equities plunge, North and South Korea make a bet on sports diplomacy, and Yellen leaves the Fed with comments unlikely to help investors stay calm. Here are some of the things people in markets are talking about. Equity Investors and Bond Bulls Rattled (Bloomberg)-Traders are anticipating heavy declines for Asian stocks …

Traders brace themselves after Friday’s U.S. equities plunge, North and South Korea make a bet on sports diplomacy, and Yellen leaves the Fed with comments unlikely to help investors stay calm. Here are some of the things people in markets are talking about.

Equity Investors and Bond Bulls Rattled

(Bloomberg)-Traders are anticipating heavy declines for Asian stocks after U.S. shares posted their worst plunge since June 2016on Friday. Bond bulls and equity investors were rattled by strong jobs data that increased the likelihood the Federal Reserve will lift rates next month, and the selling accelerated after Dallas Fed President Robert Kaplan suggested more than three hikes may be necessary this year. The 10-year Treasury yield popped above 2.85 percent for the first time since January 2014, while the U.S. dollar rose against all G-10 counterparts, with the kiwi and Aussie down more than 1.3 percent. Oil dropped and the Bloomberg Commodity Index capped its biggest weekly slide in two months. Europe’s bond selloff also deepened, and equities across the continent fell for a fifth straight day.

End of the Yellen Era

Jerome Powell will be sworn in as the new chair of the U.S. Federal Reserve Monday in Washington. In an interview that aired over the weekend, outgoing Chair Janet Yellen said U.S. stocks and commercial real estate prices are elevated but stopped short of saying those markets are in a bubble. “Well, I don’t want to say too high. But I do want to say high,” Yellen told CBS’s “Sunday Morning.” She also argued that the financial system is now “much better capitalized” than it was entering the global financial crisis a decade ago. As Powell prepares to take over, some of his colleagues are publicly agitating for a radical rethink of the central bank’s 2 percent inflation target.

North and South Korea Set Tensions Aside

North and South Korea briefly set aside months of friction over Pyongyang’s nuclear and missile advancements on Sunday, as women ice hockey players from the two countries played as a unified team in a friendly match against Sweden. Tensions remain high ahead of the Winter Olympics, which open this Friday in Pyeongchang, South Korea: on Sunday, North Korea denounced Trump’s recent state of the union speech as the “height of arrogance” and criticized the U.S. for trying to create division on the Korean peninsular. Meanwhile North Korea received almost $200 million between January and September 2017 from exports of coal, iron, steel and other commodities banned under UN Security Council resolutions meant to crack down on Pyongyang’s nuclear ambitions, Bloomberg News reported Sunday.

Tesla’s Australian Power Plan

Solar panels and Tesla Inc. batteries will be rolled out to at least 50,000 South Australian homes to form what the state government says will be the world’s largest virtual power plant. Beginning with a trial of 1,100 public housing properties, the project will be expanded to another 24,000 public housing properties, the government said Sunday ahead of a state election. Then a similar deal will be offered to all South Australian households, with a plan for at least 50,000 to participate in the next four years. The news comes just days after Tesla’s plan for a major expansion of its solar division at U.S. home-improvement chain Home Depot Inc. was announced.

Coming Up…

February’s already-relentless pace won’t be taking much of a break on Monday as the month’s first full week gets going. The day will bring reports on South Korean trade, Australian job ads, PMIs for Singapore and Hong Kong, as well as Indonesian GDP. Asia’s earnings seasons will also heat up, with reports expected from Mitsubishi, Panasonic, Suzuki, Tata Motors and SK Telecom. And the Seoul High Court is set to rule on appeals by both prosecutors and Samsung Electronics heir Jay Y. Lee on his five-year prison term for bribery. The European day will bring ECB President Mario Draghi presenting his annual report to the European Parliament, as well as Turkish inflation and euro area services PMI.

And finally, here’s what David’s interested in this morning

Maybe Rick Astley’s 1987 hit “Never Gonna Give You Up” was blasting through the decades-old halls of the Bank of Japan building during the bubble years. And on Friday, the bank again evoked that battle cry and stepped in to stem the bleeding in Japanese government bonds. Late last week, as yields on the 10-year JGB broke through 0.1 percent, the bank offered to buy an unlimited amount of bonds to cap the selloff and reassert its control over the bond market. The last time it did that was last summer under similar circumstances.

The difference though between now and then is there’s a more synchronized uptick in bond yields particularly in Europe and a bear steepening of curves globally. And I’m guessing the BOJ might be forced into action more frequently in the coming weeks. The sustainability of doing so is for another conversation. What’s clear at this point is that the JGB market will remain anchored and Governor Kuroda is…

Never gonna give you up, never gonna let you down,
Never gonna run around and desert you, never gonna make you cry,
Never gonna say goodbye, never gonna tell a lie and hurt you

Source: FXWire Commentary

]]>http://m2m-vn.com/fxwirepro-asian-markets-start-new-week-positive-note-gold-hovers-around-1350-mark/feed/0Fallout from a $400 million cryptocurrency hack Inbox xhttp://m2m-vn.com/fallout-400-million-cryptocurrency-hack-inbox-x/
http://m2m-vn.com/fallout-400-million-cryptocurrency-hack-inbox-x/#respondMon, 29 Jan 2018 01:24:19 +0000http://m2m-vn.com/?p=16196Fallout from Friday’s $400 million cryptocurrency hack, a big week ahead for tech stocks, and the frenzy for Chinese offshore equities builds. Here are some of the things people in markets are talking about. Crypto Hack Fallout (Bloomberg)-Three days on from the world’s biggest-ever digital currency theft, the episode is still reverberating through cryptocurrency markets and policy circles around the …

Fallout from Friday’s $400 million cryptocurrency hack, a big week ahead for tech stocks, and the frenzy for Chinese offshore equities builds. Here are some of the things people in markets are talking about.

Crypto Hack Fallout

(Bloomberg)-Three days on from the world’s biggest-ever digital currency theft, the episode is still reverberating through cryptocurrency markets and policy circles around the world. Japanese cryptocurrency exchange Coincheck Inc. said it will use its own capital to reimburse customers who lost money in Friday’s$400 million hack, a move that helped Bitcoin and its ilk to recover from their selloff on Friday. However the episode has heightened calls for stricter cryptocurrency oversight and may influence a closely watched debate in neighboring South Korea over whether to ban digital-asset exchanges outright. Meanwhile, the Bank of Japan says it sees no need to mint its own digital currency, due to lack of Japanese demand.

Kuroda at Davos

The yen strengthened as much as 1 percent against the dollar on Friday following comments by Bank of Japan Governor Haruhiko Kuroda at the World Economic Forum in Davos, but pared the gain after the central bank said the governor wasn’t revising the country’s inflation outlook. “Even medium- to long-term inflation expectations, which have been so weak in the last couple years, are now slightly picking up,” Kuroda, speaking in English, said on a panel. Later, a BOJ spokesman said Kuroda’s comment is not different from the central bank’s view stated on Jan. 23. U.S. President Donald Trump also spoke at Davoson Friday, arguing that his “America First” agenda would benefit the world. Trump is the first U.S. president to visit the conference in 18 years, and he made his government’s presence felt with a large delegation of Cabinet secretaries and top White House aides.

Chinese Stock Euphoria

The growing frenzy for Chinese offshore stocks has taken a new turn as investors bid up underperformers. As a bull market in the China H-share gauge extends into the 714th day, one of the longest in its 23-year history, investors are finding plenty of reasons to buy and few to sell. About a third of the companies on the Hang Seng China Enterprises Index racked up fresh one-year highs last week, the biggest proportion since the country’s 2015 stock bubble. Laggards such as PetroChina Co. and China Galaxy Securities Co. have soared, while stubbornly cheap banks are turning red hot.

A Good Start for Equities

Asian equities are poised for a solid start to the trading week after U.S. stocks jumpedthe most since March on Friday on strong corporate earnings. The dollar slumped to a three-year low, losing most ground among G-10 currencies to the Aussie and Swiss franc. Oil continued its ascent, while metals were mixed, with iron ore lower. Bond yields are rising even after Friday’s below-forecast 2.6 percent U.S. GDP report. This week, investors face Janet Yellen’s swan song as Fed chair, U.S. jobs data and the Treasury’s plan to cover widening deficits. Wall Street is anticipating an onslaught of supply that will at least double issuance this year to more than $1 trillion.

Coming Up…

Japan Inc. may be looking forward to some welcome distraction from yen strength as earnings reports start to flow this week. Microsoft, Facebook and PayPal release results Wednesday in the U.S., followed by Alibaba, Apple, Alphabet and Amazon a day later. In health care, Pfizer, Eli Lilly and Merck report. Boeing and UPS are also due. Deutsche Bank and oil majors Exxon Mobil and Chevron close out the week. Asia’s data docket looks very light until Wednesday’s month-end deluge. And on Tuesday night U.S. time, Trump delivers his State of the Union address, which is expected to include a push for massive infrastructure spending.

And finally, here’s what David’s interested in this morning

After 19 straight days and a 17 percent pop, Chinese H-shares took a breather Thursday. What didn’t garner much attention was the sharp pick up in fund flows from China very late into the rally. About 15 days in, southbound traffic from Shanghai and Shenzhen got quite busy. Over the next four days, the amounts coming across were more than double the 12-month average. Fifteen days in! In the chart below, we’ve combined the net flows on both stock connects into Hong Kong.

The day prior to the rally ending, fund flows had already started drying up before falling back to roughly average levels Thursday, when the index closed lower. Just to clarify, we’re not talking exorbitant amounts here. Even on those busy days, barely a third of the daily quotas were used up. Call it what you want: chasing the rally, buying into strength or even buying at the top. The point is, there’s clearly money on the mainland waiting to jump across or vice versa. There’s no way of knowing for certain whether the push was more from large institutions or the usual retail herd flows. If the past is anything to go by, it smells like the Chinese retail investor chasing the dream; something to watch when the next rally starts to form. For Terminal clients, the chart is G #BTV 4614.

]]>http://m2m-vn.com/fallout-400-million-cryptocurrency-hack-inbox-x/feed/0Trump’s trade decisionshttp://m2m-vn.com/trumps-trade-decisions/
http://m2m-vn.com/trumps-trade-decisions/#respondMon, 22 Jan 2018 01:46:00 +0000http://m2m-vn.com/?p=16116Progress for German politics is buoying the euro, the U.S. and China may be headed toward a trade war, and North Korea visits Seoul. Here are some of the things people in markets are talking about. U.S.-China Trade-Clash Fears (Bloomberg)-The next month will be crucial in signaling whether U.S. President Donald Trump’s threats to get tough on China over trade turn …

Progress for German politics is buoying the euro, the U.S. and China may be headed toward a trade war, and North Korea visits Seoul. Here are some of the things people in markets are talking about.

U.S.-China Trade-Clash Fears

(Bloomberg)-The next month will be crucial in signaling whether U.S. President Donald Trump’s threats to get tough on China over trade turn from rhetoric into reality. A year into his presidency, Trump has failed to stem growth in China’s trade surplus as an economic upswing in the U.S. fuels imports from the world’s factory floor. Yet the kind of punitive actions threatened during his campaign haven’t materialized, with Trump ordering his administration to study the challenges instead of slapping on tariffs from the get-go. Now, a raft of China-targeted trade decisions are piling up on Trump’s desk as the deadlines for those assessments loom. The clock is ticking on a decision whether to impose new tariffs on steel imports, while initial reports on aluminum and solar panels are due next week. Outside of geopolitics, trade-related fears are probably the biggest external risks we face, according to Michael Spencer, global head of economics at Deutsche Bank AG.

Merkel Makes Progress

Germany’s Social Democrats backed formal coalition talks with Chancellor Angela Merkel after a divisive party convention, marking a potential breakthrough toward her fourth term. A majority of SPD delegates gathered in Bonn on Sunday voted in favor of negotiations to renew the “grand coalition” with Merkel’s Christian Democratic Union-led bloc. Party and labor leaders had argued to move forward with a joint policy outline reached on Jan. 12, rather than walk away from government. Merkel hailed the “positive result” in Bonn before meeting with fellow leaders of her CDU in Berlin to lay out the negotiating path ahead. With coalition talks able to begin as soon as Tuesday, the end of a four-month political stalemate is on the horizon, enabling Merkel to move toward re-inauguration possibly by mid-March. The euro rose 0.4 percent to $1.2270 as of 6:30 a.m. in Tokyo.

North Korea’s Seoul Visit

An advance team for North Korea arrived in Seoul on Sunday as Pyongyang reversed a decision to cancel the visit, a day after signing an agreement with the South to march under a unified flag at next month’s Winter Olympics. North and South Korea on Saturday solidified plans to march together and agreed to compete with a joint women’s ice hockey team in a rare show of unity amid heightened tensions about Kim Jong Un’s nuclear program. With the games to be held in South Korea, the agreement offers a moment of reconciliation amid mounting tensions on the Korean peninsula involving missile tests and military exercises. North and South Korea will enter the opening ceremony in Pyeongchang under a single flag. The two nations haven’t competed as a team in 27 years.

Watching Those Central Bank Decisions

The world’s biggest bond market probably needs a little push from central banks to prop up yields at the highest in more than three years. The Bank of Japan and the European Central Bank both have policy decisions this week, before an announcement from the Federal Reserve on Jan. 31. While no action is expected from any of the three this month, investors will be on alert for the latest signals on withdrawal of policy accommodation after years of unprecedented stimulus. Any dovish hints from officials could pull the benchmark 10-year Treasury yield back from the brink: It touched 2.66 percent on Friday, the highest since July 2014. Traders are on edge because technical indicators signal weak support for the 10-year Treasury if the yield breaks even higher. That’s not to say there’s any hint of panic. In fact, strategists are questioning the pace of the ascent in yields, and anticipate a reversal if policy makers signal they’re hesitant to remove the proverbial punch bowl. “If the market is reminded that low rates globally are going to stay low, at least for this year, there’s room for these rates to come back,” said Gennadiy Goldberg, an interest-rate strategist at TD Securities. “Everyone is trying to get all excited about rates moving up today, and one of the biggest pain trades is that rates start moving up later.”

Coming Up…

It isn’t just central-bank decisions that will keep this week’s news cycle humming. Legislators are working to resolve the U.S. government shutdown, and the World Economic Forum takes place in Davos, Switzerland. On the shutdown, the House and Senate were back in session Sunday with a federal government shutdown in its second day amid a spending-bill impasse in Congress. The House is supposed to be on recess this week, but members stayed in Washington as negotiations continue. A bipartisan group of 20 Senate centrists was working Sunday on a compromise plan to get the government funded for three more weeks while the immigration debate continues. But there was no assurance that party leaders — or the House — would go along. The shutdown may even affect Davos, as Trump is scheduled to join world leaders and senior executives there, but the trip may be scuttled depending on what’s happening on the home front.

And finally, here’s what Cormac’s interested in this morning

After handily beating American stocks last year, it’s worth asking whether Asian equities’ outperformance can last — especially if China slows, as many expect in 2018. Yet by some measures they’re looking all the more attractive relative to their U.S. counterparts. On a forward price-to-earnings basis, they are trading close to at least a 13-year relative low, according to data compiled by Bloomberg. And on a price-to-book basis, they are at the cheapest in 16 years.

Sure, this is in part down to an arguably over-valued American stock market, but, as Axa’s Mark Tinker points out, the valuation gap is “extraordinary.” Asian earnings are growing steadily, balance sheets are strong, real wages are rising, dividend payouts are high and payout ratios are rising. Asia currently provides between a quarter and a third of all dividends globally and yet barely features in the portfolios of most income investors, according to Tinker. It’s hard to see that combination of relative value and income potential staying unnoticed for long.

DXY: The dollar index declined after the U.S. House of Representatives passed a bill to fund government operations through Feb. 16 and avoid agency shutdowns this weekend, however, the bill still needs an approval by the Senate, where it faces an uncertain future. The greenback against a basket of currencies traded 0.1 percent down at 90.42, having touched a low of 90.11 the day before, its lowest since January 2015. FxWirePro’s Hourly Dollar Strength Index stood at -43.44 (Neutral) by 0500 GMT.

EUR/USD: The euro rose, extending previous session gains, as investors speculated the European Central Bank will edge towards ending its bond purchase programme later this year. The European currency traded 0.2 percent up at 1.2262, having touched a high of 1.2322 on Wednesday, its highest since Dec. 2014. FxWirePro’s Hourly Euro Strength Index stood at 51.94 (Bullish) by 0400 GMT. Investors’ attention will remain on Eurozone current account, ahead of U.S. Michigan consumer sentiment index and Fed’s Quarles speech. Immediate resistance is located at 1.2300, a break above targets 1.2370. On the downside, support is seen at 1.2120 (50.0% retracement of 1.1916 and 1.2322), a break below could drag it lower 1.2072 (38.2% retracement).

USD/JPY: The dollar extended previous session losses on fears over a possible U.S. government shutdown. The major was trading 0.2 percent down at 110.87, having hit a low of 110.19 on Wednesday, its lowest since Sept 15. FxWirePro’s Hourly Yen Strength Index stood at -96.07 (Slightly Bearish) by 0400 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. Michigan consumer sentiment index and Fed’s Quarles speech for further momentum. Immediate resistance is located at 111.78 (50.0% retracement of 110.19 and 113.38), a break above targets 112.16 (61.8% retracement). On the downside, support is seen at 110.19 (Jan. 17 Low), a break below could take it lower 110.00.

GBP/USD: Sterling steadied above the 1.3900 handle and was on track for a fifth consecutive week of gains on the back of broad dollar weakness and optimism that Britain will reach a favorable divorce deal with the EU. The major traded 0.2 percent up at 1.3915, having hit a high of 1.3941 on Wednesday, it’s highest since June 2016. FxWirePro’s Hourly Sterling Strength Index stood at 139.08 (Highly Bullish) by 0400 GMT. Investors’ focus will remain on the UK retail sales, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3950, a break above could take it near 1.4000. On the downside, support is seen at 1.3805 (5-DMA), a break below targets 1.3757 (61.8% retracement of 1.3458 and 1.3941). Against the euro, the pound was trading 0.1 percent down at 88.12 pence, having hit a high of 88.01 pence the day before, it’s highest since Dec. 19

AUD/USD: The Australian dollar traded just below a 4-month peak, supported by Thursday’s jobs report which led the market to bring forward the likely timing of a rate hike from the Reserve Bank of Australia. The Aussie trades 0.3 percent up at 0.8017, having hit a high of 0.8022 on Wednesday; it’s highest since Sept. 21. FxWirePro’s Hourly Aussie Strength Index stood at 126.23 (Highly Bullish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7978 (78.6% retracement of 0.7807 and 0.8022), a break below targets 0.7942 (61.8% retracement). On the upside, resistance is located at 0.8050, a break above could take it near 0.8100.

NZD/USD: The New Zealand dollar held firm near 4-month highs as the greenback declined on fears of a US. .government shutdown. The Kiwi trades flat at 0.7299, having touched a high of 0.7331 on Wednesday, its highest level since Sept. 25. FxWirePro’s Hourly Kiwi Strength Index was at 23.57 (Neutral) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7340, a break above could take it near 0.7390. On the downside, support is seen at 0.7236 (10-DMA), a break below could drag it lower 0.7133 (Jan 10 Low).

Equities Recap

Asian shares rose to record highs, while the greenback eased on worries over a possible U.S. government shutdown.

Crude oil prices declined by 1 percent to a 10-day as a bounce-back in U.S. production outweighed ongoing declines in crude inventories. International benchmark Brent crude was trading 0.8 percent down at $68.58 per barrel by 0414 GMT, having hit a low of $68.28 earlier, its lowest since Jan. 9. U.S. West Texas Intermediate was trading 0.8 percent up at $63.16 a barrel, after easing as low as $62.82, its lowest since Jan. 9.

Gold prices rose, supported by a weaker dollar and worries about a possible U.S. government shutdown. Spot gold was up 0.4 percent at $1,331.48 an ounce by 0419 GMT, having touched its weakest level since Jan. 12 at $1,324.15 on Thursday. U.S. gold futures were up 0.1 percent at $1,327.90.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.629 percent higher by 0.019 bps, while 5-year yield was 0.019 bps up at 2.423 percent.

The Japanese government bonds remained flat in muted trading session Friday as investors are curiously eyeing the Bank of Japan’s (BoJ) monetary policy decision, scheduled to be held early next week for further detailed insight into the debt market. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around 0.08 percent, the yield on the long-term 30-year note edged nearly 1/2 basis point lower at 0.84 percent and the yield on short-term 2-year traded nearly flat at -0.13 percent.

The Australian 10-year government bond yields hit a near 4-month high on the last trading day of the week, tracking similar sound in the U.S. counterpart, following a possibility of a re-shuffling in the United States Federal Reserve. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, flaunted 6-1/2 basis points at 2.85 percent (highest since October 2017), the yield on the long-term 30-year note jumped a little over 8 basis points to 3.50 percent and the yield on short-term 2-year climbed 4-1/2 basis points to 2.12 percent.

The Canadian government bond prices were lower across much of the yield curve, with the two-year down 4 Canadian cents to yield 1.809 percent and the 10-year falling 11 Canadian cents to yield 2.219 percent. The 10-year yield touched its highest intraday since September 2014 at 2.232 percent.